Developers, bankers, regulators, investors, businessmen, thought leaders and visionaries from around the globe descended on New York for a three-day event to discuss what has taken the world by storm, blockchain technology and its applications.
Consensus 2016, the biggest event since blockchain was invented seven years ago, set the theme with a general feeling that blockchain is not only real, but that something big is happening as expressed by Larry Summers, former treasury secretary and keynote speaker:
I think this whole sphere is ripe for huge opportunity… We have over the last generation had a lot of financial innovation for the benefit of money and I think it is a good thing to have some financial innovation for the benefit of people in the form of reducing their costs of transacting and exchanging and I think that’s what this is all about.
While the smartest men and women in Silicon Valley were previously focusing on creating a better picture sharing app or making ads more enticing for us to click, some of them are now betting their careers on blockchain technology. Setting up start-ups and building products to transfer value more efficiently, more cheaply and faster as well as taking advantage of the many opportunities offered by programmable money. Likewise, some banking executives are leaving to launch their own blockchain products, joined, in some cases, by experienced developers from giant tech companies, such as IBM. Meanwhile, banks see what is coming and are trying to lead while giant tech companies are focusing on industrial uses of smart contracts and machine to machine payments or IoT.
A fundamental shift in attitude seems to have occurred at the highest governance levels. Led by London, which uniquely has enthusiastically embraced Fintech and blockchain technology, going so far as to publicly encourage start-ups to disrupt banks, regulators across the world, but primarily in USA and China, are now taking a back seat and even quietly encouraging blockchain innovation as they see a huge opportunity to grow a skill base for the adoption of this new invention.
“I don’t really believe that there is a regulatory race to the bottom in sophisticated market places and the reason I don’t believe that is because market participants don’t want to go to the least regulated jurisdictions. If they did, then perhaps Zimbabwe might be the financial capital of the world and I don’t mean anything about Zimbabwe, but the fact of the matter is market participants go to the jurisdictions that have the best regulations, the best balance of regulations.” CFTC Commissioner J. Christopher Giancarlo.
While previously there was much discussion about what sort of regulation to employ, the current emphasis seems to be on updating outdated regulations so as to account for the new invention or at the very least to “do no harm”.
London has given the green light. America seems to have followed suite. China has been quiet at top governance levels, but is likely to follow.
There is a lot of confusion on the usefulness of permissioned chains and how they are meant to operate in practice. Adam Ludwin, founder of Chain, a blockchain tech company, introduced OS1, a permissioned blockchain protocol for use by financial institutions. It turns current assets, such as dollars, into blockchain tokens, comparable to a bitcoin token.
In contrast, Balaji S. Srinivasan, founder of 21.inc, illustrated the benefits of open blockchains in announcing a vision of machine payable web, introducing a free downloadable software that allows you to “earn bitcoin and also connect to other machines that spend and receive bitcoin,” thus making online purchases as easy as one click. He further provided the following insight:
“Once you get outside of a certain trust network, then trust necessarily breaks down. Take the example of Alibaba recent public offering. That’s where you have two mostly incompatible banking systems, the Chinese system and the American system, and there is genuine, despite [being] trusted within each circle, within each state, there is distrust between them in the sense that people in US don’t use the same accounting as the Chinese and vice versa…
That kind of situation is something where you can only expand the private blockchain so much until you get into banks that are into Russia or China or Iran or in some region that is not really a fully trusted party and in that case you need a mechanism to generate trust in the absence of social trust and that is technical trust. That is, something where you can’t do social diligence, but you can do technical diligence and I think there is a limit how big a private blockchain can get because of that.”
There is currently much discussion about interoperability, allowing different private blockchains to connect and communicate with each other, but it is not clear whether the network would be opened to individuals, or indeed to machines, which may limit its appeal as compared to open networks such as Bitcoin.
David Rutter, founder of R3, argued that bitcoin had a role to play, perhaps as digital gold, but that its trustless set up was not necessary for banks:
With the institutions we are working there is this embedded trust, embedded in legal documentation, embedded in processes, embedded in the regulatory side. For us the idea of a trustless solution is not necessary.
Some compare these private blockchains to intranets, which continue to be in use within corporate networks. Others suggest that banks or giant tech companies or perhaps a start-up may take the next step and offer an AOL internet, or a Corporate Blockchain, to the public, reducing differences between permissioned and permissionless. Regardless, Bitcoin is likely to continue to have appeal as the most secure, open, global and permissionless blockchain.
The main take away from Consensus 2016 seems to be that almost no one doubts blockchain technology is a worthy new invention. The three day event, may, therefore, signal blockchain’s official recognition and acknowledgment, shifting the focus from the why or what to the how to implement this new invention.
Featured image from Shutterstock.